What is cryptocurrency: The Definitive Guide

This is the ultimate guide for cryptocurrency

So if you want to learn:

  • What is cryptocurrency
  • Crypto Tokens
  • Top 10 Cryptocurrencies in the world – April 2022
  • Investing in Cryptocurrency

Then you’ll love this new guide.

Let’s get started.

Cryptocurrency is a decentralized digital currency based on blockchain technology. It is secured by cryptography. Blockchain, decentralization, and cryptography are the three terms that must be understood in order to understand cryptocurrency. 

Blockchain is a system of recording information in a way that makes it difficult or impossible to alter, hack, or cheat the system. Blockchains are essentially digital ledgers of transactions that are duplicated and distributed across a global network of computers. In simple words, Blockchains are constantly growing lists of records – called blocks – that are encrypted and linked together. The ‘Genesis block’ is the first block in any blockchain-based protocol. Except for the Genesis block, each block contains data, a previous hash, and its own hash.

All users have access to the same information immediately, transparently, and “immutably.” Any record in the blockchain is immutable, meaning that it can never be altered – not even by its administrator.

We use centralized money, which is controlled by authorities such as the Reserve Bank of India. Decentralization in cryptocurrency means there is no similar authority that can be held responsible for supervising the rise and fall of a particular cryptocurrency. The advantages of this are numerous.

The following are a few of these benefits:

  • All currency holders have access to the same information, so they do not need to “trust” a single governing entity.
  • Only users of the network have access to the network’s data, and that data is heavily secured. In addition to shared ownership, all users are responsible for ensuring the integrity of the data. This means there is little chance of data mismanagement or miscommunication. You could call it the democracy of data.
  • Security, which serves as a key component of blockchain technology.

Cryptography is a technique of securing information and communications through the use of codes so that only those persons for whom the information is intended can understand it and process it. Thus, preventing unauthorized access to information.

Crypto Tokens

Crypto tokens are digital assets that are built on another cryptocurrency’s blockchain. The word “token” is technically the same thing as “cryptocurrency” or “crypto asset.” But increasingly, depending on the context, it has taken on several more specific meanings.

Role of Money?

Crypto Buzzword – Bitcoin

Bitcoin is a decentralized digital currency that you can buy, sell and exchange directly, without an intermediary like a bank. Bitcoin’s creator, Satoshi Nakamoto, originally described the need for “an electronic payment system based on cryptographic proof instead of trust.”

A purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution. “ -Satoshi Nakamoto.

It is relatively easy to obtain bitcoins and to become familiar with the Bitcoin system. The four fundamental ways to obtain bitcoins include:

  • Transactions – Bitcoin is accepted as payment for goods and services or as a peer-to-peer transfer method by individuals and businesses.
  • Digital Currency Exchanges – Digital currency exchanges operate similarly to traditional exchanges, allowing individuals to buy and sell bitcoins at the prevailing market rate. Demand, liquidity, and other market conditions affect the exchange rate of bitcoins.
  • Mining – Miners are the backbone of the Bitcoin ecosystem. In exchange for their services, they are rewarded in bitcoin. It also involves solving the algorithms required to process transactions, which helps to secure the network and keep it running smoothly.
  • Bitcoin ATMs – Bitcoin ATMs are an increasingly popular solution for buying the digital currency because of their convenience and simplicity. The process of using a bitcoin ATM is relatively simple. A QR code on a smartphone is scanned by ATM users to verify their bitcoin wallet. Users then insert cash into the ATM and submit the transaction. The appropriate number of bitcoins is then transferred to their wallet based on the current exchange rate.

Top 10 Cryptocurrencies in the world – April 2022

RankCryptocurrency NameSymbol
1Bitcoin logoBitcoinBTC
2Ethereum logoEthereumETH
3Tether logo TetherUSDT
5USD Coin logo USD CoinUSDC
7Cardano logo CardanoADA
8Terra logo TerraLUNA
9Solana logo SolanaSOL
10Avalanche logoAvalancheAVAX

Cryptocurrency adoption across the world

The adoption of cryptocurrency is growing around the world. Worldwide adoption jumps over 880% With P2P Platforms driving Cryptocurrency usage in Emerging Markets (Source: Chainalysis – The 2021 Global Crypto Adoption Index). This report shows that residents of more and more countries around the world are taking the dive into cryptocurrency or seeing existing adoption increase. Cryptocurrency adoption in emerging markets, including Kenya, Nigeria, Vietnam, and Venezuela is growing due to their fiat currency devaluation. Consumers from the United States or European Union may view cryptocurrencies as a novelty.

In other countries, strict capital controls are in place to control the flow of money and/or high taxes are charged. Cryptocurrencies can be used to circumvent these capital controls and taxes-legal or not-and have led to an increase in consumer and business demand. Many countries have started cracking down on the illegal use of cryptocurrencies for tax evasion and illegal purchases and sales abroad.

  • Governments around the world are concerned about the cryptocurrency Bitcoin.
  • Bitcoin is not regulated by any uniform international law, despite its use for buying goods and services.
  • Bitcoin can be used in many developed countries, including the United States, Canada, and the United Kingdom.
  • Some countries, such as China and Egypt, have made it illegal to use Bitcoin.

Here are some factors influencing the use of cryptocurrencies

  • Despite its potential for huge gains, cryptocurrencies are also prone to volatility, which can result in dramatic losses.
  • Cryptocurrencies provide an easy-to-use digital alternative to fiat currencies.
  • Similarly, to precious metals like gold, cryptocurrencies have a noncorrelated market which can act as a hedge against risk.

Investing in Cryptocurrency

One way to invest in cryptocurrency is to purchase and hold a cryptocurrency. The most common way to add crypto exposure to your portfolio is by buying cryptocurrency directly

  • Open an account with a cryptocurrency exchange if you want to buy or sell cryptocurrencies. The function of crypto exchanges is comparable to that of stock brokerage platforms, providing the tools required to buy and sell digital currencies and tokens.
  • There are many factors to consider when selecting a cryptocurrency exchange, including supported assets, fees, payment methods, and security.
  • Once you have selected cryptocurrency exchange, you can sign up to open an account. Then you need to complete KYC verification according to the laws of the land.
  • To purchase crypto, you must have funds in your account. You can deposit money into your crypto account by transferring it from your bank account and making a payment with a debit or credit card. You may have to wait a few days before you can use the money you deposit to buy cryptocurrency, depending on the exchange you use and your funding method.
  • After you have transferred money to your crypto exchange account, you can place an order to buy cryptocurrency. Exchange orders work just like stock market orders.
  • A centralized cryptocurrency service cannot provide the same level of security as a bank. Crypto brokers, for example, are not as tightly regulated, and funds can be permanently lost if they are lost. Initially, you can store your crypto assets in a crypto wallet attached to the exchange. You can also use a separate hot or cold wallet to make it more secure.
  • To convert Cryptocurrency into money, you can sell your Cryptocurrency through Crypto Exchange.

Cryptocurrency Market

A cryptocurrency only exists as a shared digital record of ownership, which is stored on a blockchain. A user sends cryptocurrencies to another user’s digital wallet when sending them to another user. The transaction isn’t considered complete until it has been verified and added to the blockchain. This process is called mining. New cryptocurrencies are usually made in this manner as well.

What defines the price of Cryptocurrency?

Cryptocurrency markets are driven by supply and demand. The decentralised nature of these currencies, however, allows them to remain free from many of the concerns faced by traditional currencies, such as economic and political instability. Bitcoin and other cryptocurrencies still face a lot of uncertainty, but the following factors can impact their prices:

  • Supply: the total number of coins available and their release, destruction, or loss rate
  • Market capitalisation: a measure of how users perceive the value of all coins
  • Press: how the media portrays cryptocurrencies and how much media coverage they receive
  • Integration: the ease with which cryptocurrency can be integrated into existing infrastructure, such as payment systems for e-commerce
  • Key events: Updates to regulations, security breaches, and economic setbacks

What Is Crypto Mining?

Several cryptocurrencies, including Bitcoin, use mining to create new coins and verify new transactions. A decentralized network of computers all over the world verifies and secures blockchains – the virtual ledgers that record cryptocurrency transactions. Computers on the network are rewarded with new coins for contributing their processing power. It’s a virtuous circle: the miners maintain and secure the blockchain, the blockchain awards coins, and the coins provide an incentive for the miners to maintain the blockchain.

When a cryptocurrency is spent, a member must debit one account and credit the other when the ledger is updated, just like physical currencies. Despite this, digital currencies present a challenge since they are easily manipulated. Due to this, Bitcoin’s distributed ledger only allows verified miners to update transactions. As a result, miners are responsible for preventing double-spending on the network.

During this process, new coins are generated to reward miners for their efforts to secure the network. Due to the lack of centralized authority in distributed ledgers, mining is crucial to validating transactions. The miners are incentivized to secure the network by participating in the transaction validation process. This increases their chances of winning newly minted coins.

A Proof-of-Work (POW)  consensus protocol was established in order to ensure that only verified crypto miners can mine and validate transactions. A proof-of-work protocol also provides network security against external intrusions.

bitcoin mining

Cryptocurrency Mining Methods

Using an application

You can start mining this way easily. There are several apps that will do the work for you. For example, on your smartphone, you can mine Bitcoin or any other cryptocurrency by using mining applications. However, it has some disadvantages, including that it is less efficient than traditional software and hardware. Putting that same time and effort into traditional mining setups with more sophisticated and powerful tools will yield considerably more profit than mining cryptocurrency on an Android device.

Mine in the cloud

You can also pay someone else to do the work for you. This is known cloud mining. You would need to create an account on a cloud mining website, and then pay them to mine bitcoin and other cryptocurrencies for you. Your account will mine more money the more money you pay into it.

Building your own mining rig

If you really want to invest in the mining process, you might want to invest in an ASIC (Application-Specific Integrated Circuit) hardware device, which is often called a mining rig.

These are basically just processors designed for mining digital currencies and are designed to run non-stop all day long. However, these are extremely expensive and cost several thousand dollars each. The operation of one of these devices can also consume a lot of energy. With all the costs involved, it might take you more than a year to make a profit from successful mining.

Initial Coin Offerings

Initial coin offerings are a popular way to raise funds for products and services usually related to cryptocurrency. Initial coin offerings are like initial public offerings, but coins issued in an ICO may also be useful for a software service or product. ICO is considered as Crowdfunding for Investment & Consumption. Some ICOs have resulted massive returns for investors. Numerous others have turned out to be fraudulent or have performed extremely poorly. ICOs are, for the most part, completely unregulated, so investors must exercise a high degree of caution and diligence when researching and investing in ICOs.

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